The S&P 500 topped 2,000. Should you care?

WilliamL. Watts

NEW YORK (MarketWatch) — The S&P 500 on Monday traded above 2,000 for the first time ever. Where’s the hoopla?

It’s a far cry from the late 1990s when the Dow’s
DJIA, -0.32%
crossing of 10,000 was heralded as the apotheosis of a new stakeholder economy in which every citizen was set to get rich on dot-com stocks.

The S&P 500
SPX, -0.23%
pushed above 2,000 in early action, then changed hands on either side of that level over the course of the day. The index hit an intraday high at 2001.95 but trimmed gains ahead of the close to end below 1,998. The index still rose 0.5% on the day and easily topped its previous all-time closing high of 1,992.37 from Thursday.

Nowadays, moves through big, round numbers seem to stir less excitement, particularly in an environment that’s been regularly described as the most-hated bull market in history. Still, on a relative basis and as a testament to the historical relevance of the current rally, the move by the S&P 500 is worth acknowledging. But that’s about it.

“Nobody trades the market based on the round numbers that I know of, institutionally,” said Tony Dwyer, chief strategist at Canaccord Genuity, in an interview last month. The S&P 500 had flirted with the 2,000 level in July before succumbing to a mild pullback.

“It attracts attention to investing, which is good. ... But from the standpoint of can the market get through 2,000, I don’t think it has any relevance to how the market trades,” he said.

A more interesting question is why does the Dow attract so much more attention than the S&P 500?

It’s a conundrum analysts have wrestled with for a long time. In part, it’s simply history. The Dow Jones Industrial Average, first calculated in 1896, has been around a lot longer than the S&P 500, which debuted in its present form in 1957.

That said, only a handful of mutual funds or exchange-traded funds are tied to the Dow, which is made up of 30 companies. The S&P 500, by contrast, is possibly the most widely used of equity indexes, representing around 80% of the investable U.S. equity market, according to Morningstar.

For market professionals, there’s no doubt that eyes are more firmly attuned to the S&P 500 rather than the Dow, said Scott Wren, senior equity strategist at Wells Fargo Advisors in St. Louis.

“When friends ask me what did the market do today, ... I would speak in terms of what the Dow Jones change was rather than what the S&P change was,” Wren said. Among colleagues, however, the discussion almost always centers on the S&P 500.

Like most prognosticators, Wren’s work is centered almost entirely around the S&P 500. For the record, both he and Dwyer had seen the index clearing 2,000 this year. Wells Fargo’s 2014 S&P 500 target is 1,975 to 2,025, while Dwyer is often described as the biggest bull on the Street with his call for the index to hit 2,185.

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